If we compare the “age” of the existence of banks and microfinance organizations, the latter are still relatively “young” in the provision of credit services. But even despite such a “young” age, the activities of the MFI have long managed to conquer the minds of potential borrowers. After all, getting a small loan in a matter of minutes is a pretty attractive opportunity for any borrower. And if we also take into account the fact that microcredits are issued without a thorough check of the solvency of borrowers, this, perhaps, becomes an indisputable advantage of modern microcredit.
Of course, only cheese in a mousetrap is free. It is clear that the loans provided by the MFI are not a free share. This form of lending has not only positive aspects, but also negative ones. Therefore, before deciding where it is better to apply for a loan – to a bank or an MFI, it is worth weighing all the pros and cons, and only after that make final decisions. After all, here we must understand one simple truth: the easier it is to take a loan, the more expensive it will be for the borrower. And if a person is consciously ready for this, then yes, microcredit is exactly what is needed.
So, first you need to figure out what are the advantages of this form of lending.
1. Microcredits are available to almost every borrower who has reached the age of eighteen and has a passport with a registration on his hands. Age restrictions, unlike banks, are practically absent in MFIs. So, if it will be extremely difficult for a pensioner or student to get a loan from a bank, then there are no such facets in MFIs.
2. Get a microloan washes even the person who is not able to confirm their solvency. That is, if an income statement is required in the bank, then there is no need for a microcredit. That is, it is good if the borrower is able to confirm his income level. But if he is unable to do this for some reason, then this will not be a reason for refusing to issue a loan.
3. Unlike banks, MFIs do not require any collateral for loans. That is, the borrower does not need to look for solvent guarantors who can cover the borrower in case of anything. There is also no need to collect documents for the collateral object that is planned to be provided to the lender. There is no collateral, unlike banks.
4. Loans are made in a matter of time, almost fifteen minutes maximum. All that is needed for this is the borrower’s passport, and, preferably, some other document proving the identity of the borrower. Moreover, a loan can be obtained remotely, that is, without a personal visit to the office of a credit institution. All you need is to go to the MFI website, fill out an application form and send it online. And after a few minutes to get a positive response. It is possible to receive credit funds in various ways: transfer to an account in a bank, to a credit card, to an electronic wallet, and even with a cash courier. In general, the service is designed to deliver less discomfort and more convenience to the borrower.
5. Microcredit has very flexible terms of registration. That is, you can take a loan for a couple of days, I will not give it, for a month – all at the request of the borrower. However, most often these are “payday loans”, and therefore the return of funds with interest is carried out no more than a couple of weeks.
6. The fact that such loans are granted even to those borrowers who own a badly damaged credit biography also comes out in favor of microloans. And if in the bank such an applicant is most likely denied a loan, then the MFI will simply close their eyes to a bad credit history. Moreover, a microloan will help a person who has a bad biography of the borrower, with a good payment of a microcredit with interest, correct the once corrupted history. Data on registered microloans are entered into the credit biography of any borrower.
7. There will be no hidden fees, additional costs when registering a microloan, which cannot be said about bank loans. So, all that the borrower has to pay is the fixed percentage of microloans.
Now a few spoons of tar that darken the overall picture of micro loans.
1. The most unpleasant moment in the case of microloans are huge rates for small loan amounts. Their size can reach two percent per day. Therefore, it is advisable to arrange such loans for a minimum period – for a week, maximum – for a month. Otherwise, you will have to give double duty.
2. The minus is also in the fact that the borrower does not have to rely on large loan amounts – from several thousand to several tens of thousands of rubles. Although, to their regular clients, time-tested, so to speak, MFIs make concessions and can increase the size of the loan and slightly lower the rate.
There are a lot of scammers that appeared in this area. Therefore, it is necessary to choose the organization very carefully, studying, first, its rating and feedback from former customers, which will help protect the borrower from trouble in the future.